Feds shut down Silk Road, arrest 'Dread Pirate Roberts'

SAN FRANCISCO — Federal authorities arrested a San Francisco man they say founded an online black market that connected drug dealers with clients in deals that were consummated with bitcoin and illicit mailings.

In court papers made public Wednesday, prosecutors alleged that Ross William Ulbrecht founded and operated Silk Road, using the name "Dread Pirate Roberts"; Ulbrecht was arrested Tuesday while using a computer at a public library in San Francisco and made an initial appearance in a San Francisco court on Wednesday.

Investigators say that Silk Road offered a range of illegal drugs, as well as other illicit goods and services. Undercover agents in New York made more than 100 purchases of LSD, Ecstasy, heroin and other drugs offered on the site, and the website's listings included one vendor who offered to hack into Facebook, Twitter and other social networking accounts and another selling tutorials on how to hack into ATMs.

Under the "Forgeries" category, sellers advertised forged driver's licenses, passports, Social Security cards and other documents. Silk Road managed transactions totaling 9.5 million bitcoin in its two-and-a-half years of operations and received commissions of more than 600,000 bitcoin, according to authorities. Bitcoin is a virtual currency created in 2008; while the value of a single bitcoin changes rapidly, prosecutors estimate that Silk Road executed $1.2 billion in sales and received $80 million in commissions.

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Authorities further said that Ulbrecht had received about $3.4 million in bitcoin through the site, "by far the largest account balance held by any Silk Road user at the time," according to the court papers.

The court papers cite a LinkedIn profile that says Ulbricht graduated from the University of Texas with a physics degree and also attended graduate school in Pennsylvania. It says he has focused on "creating economic simulation" designed to "give people a firsthand experience of what it would be like to live in a world without the systematic use of force."

As of July, there were nearly 1 million registered users of the site from the United States, Germany, Russia, Australia and elsewhere around the globe, the court papers said.

The Associated Press contributed to this report. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.